Efforts Fail to Block Calif. School Reserve Proposal

Budget reserves are vital to the financial well-being of school districts and it is completely unacceptable that they were capped in this years budget at the last minute, said Assembly Republican Leader-Elect Kristin Olsen, R-Modesto.

SAN FRANCISCO - Attempts by California Republicans to reverse proposed limits on school district reserve levels have stalled in the legislature and will not likely move forward this year.

The reserve limit proposal was included in the education trailer bill as part of the state's fiscal 2015 budget and will be put before voters on the November ballot. If approved, it would cap the amount of reserves to 6% of expenditures for most school districts when the state deposits money into its own state level school reserve.

"Budget reserves are vital to the financial well-being of school districts and it is completely unacceptable that they were capped in this year's budget at the last minute," said Assembly Republican Leader-Elect Kristin Olsen, R-Modesto.

On Aug. 18 Olsen, along with Senator Jean Fuller, R-Bakersfield, introduced Assembly Bill 146, which would restore the ability of school districts to save money in reserve accounts. It would repeal the caps and ensure that school districts can maintain healthy reserves to protect themselves from future economic downturns.

A spokesperson for Olsen said they submitted a request to the Senate Rules Committee to have the bill heard in Senate Education, which was denied Wednesday.

Fuller, the bill's co-author, said she was frustrated that the majority of her colleagues would not give parents, students and education professionals the opportunity to hear and speak on their proposal. She requested a vote on the Senate Floor to have the bill heard in Senate Education, but the measure failed on a party line vote.

"The bill will probably not move forward this year, but we are committed to carrying the effort forward into the next legislative session," said Allison Wescott, a spokesperson for Olsen.

The proposal to cap school district reserves will appear on the November ballot with the state's rainy day fund measure, which would increase the rainy day fund size and allow the state to make deposits to the fund with capital gains revenue spikes.

Proponents of the proposal, including the California Teachers Association, say it will prevent money from being stockpiled instead of being spent in the classroom.

Opponents, which include several school district officials, say the cap will cause districts to deplete reserves to an unhealthy amount and leave them unprepared to deal with future economic uncertainty.

"Placing a cap on the amount of budget reserves that school districts can maintain is short-sighted, and inconsistent with sound fiscal practices," said Beverly Heironimus, Legislative Committee Chair for the California Association of School Business Officials and Assistant Superintendent of Business Services for the Dublin Unified School District. "Requiring school districts to deplete their reserve funds will not result in more educational programs, and will only jeopardize their fiscal solvency in the next economic downturn."

Opponents also argue that the proposal was added into the budget in a last-minute amendment that didn't allow for appropriate legislative deliberation.

Fitch Ratings said that, if approved, the proposal could weaken the credit quality of a number of school districts in the state. Standard & Poor's said it would have "neutral to negative" implications for districts.

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